Manufacture by repacking and marking made recovered mercury excisable; nondisclosure also justified extended limitation and penalties.

Recovered mercury cleared after decomposition of sodium amalgam was treated as manufacture because repacking and marking in smaller containers rendered the product marketable under Chapter Note 10 to Chapter 28. The note also states that Rule 57F(18) applied where the waste arose from inputs on which Modvat credit had been taken, so the mercury was excisable and duty was sustained. On limitation and penalties, the text says the extended period was invocable because the full factual position was not disclosed, and on that basis interest, penalty, and confiscation of the unaccounted mercury were upheld.

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Issues: (i) Whether used mercury recovered from dismantled mercury cells, after decomposition of sodium amalgam, amounted to manufacture and was liable to central excise duty, and whether Chapter Note 10 to Chapter 28 and Rule 57F(18) of the Central Excise Rules, 1944 applied. (ii) Whether the demand was barred by limitation and whether penalty and confiscation were justified.

Issue (i): Whether used mercury recovered from dismantled mercury cells, after decomposition of sodium amalgam, amounted to manufacture and was liable to central excise duty, and whether Chapter Note 10 to Chapter 28 and Rule 57F(18) of the Central Excise Rules, 1944 applied.

Analysis: The recovery of mercury in the electrolytic process was held to result in a distinct marketable product when the mercury was taken out of the process and cleared from the factory. The recovery, packing and marking of the mercury in smaller containers and drums satisfied the statutory concept of manufacture under Chapter Note 10 to Chapter 28, which treats labelling, repacking from bulk packs to retail packs, or any other treatment rendering the product marketable as manufacture. The Tribunal further held that Rule 57F(18) applied because the waste arose from processing of inputs on which Modvat credit had been taken. The appellants' reliance on earlier decisions was rejected on the facts.

Conclusion: The issue was decided against the assessee. The used mercury was held to be excisable and the duty demand on this count was sustained.

Issue (ii): Whether the demand was barred by limitation and whether penalty and confiscation were justified.

Analysis: The Tribunal found that the appellants had not disclosed the full factual position, as the mercury inventory contained both non-credit and credit-bearing mercury and this was not correctly represented. The extended period under Section 11A was therefore held invocable. On the same reasoning, interest and penalty were upheld. The unaccounted quantity of used mercury was also held liable to confiscation, and the connected penalty on the concerned officer was sustained.

Conclusion: The issue was decided against the assessee. The demand was held to be within limitation, and penalty and confiscation were upheld.

Final Conclusion: The appeals failed in full, and the Commissioner's order confirming duty, interest, penalty, and confiscation was sustained.

Ratio Decidendi: Where recovered goods are cleared after repacking and marking in a manner that renders them marketable, such activity amounts to manufacture; and where material facts are not fully disclosed, the extended limitation period and consequential penal provisions may be invoked.

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